FirstGroup among Scots firms urged to cut supplier costs
Major Scottish businesses such as SSE and FirstGroup are being urged to reduce supplier costs to save jobs to help withstand the economic impact of coronavirus, after new research found that such expenses comprise 70 per cent of FTSE 350 firms’ total spend.
The study, from procurement consultancy Proxima and the Centre for Economics and Business Research, said 19 of Scotland’s largest firms are listed in the FTSE 350, also including Cairn Energy and Irn-Bru maker AG Barr.
Proxima said FTSE 350 firms would get a 27 per cent boost in core earnings from a 10 per cent cut in supplier spend – whereas they would receive just a 12 per cent increase from a 10 per cent drop in workforce costs. The State of Spend 2020 report also shows that average supplier costs make up 60 per cent of FTSE 350 companies’ total revenues.
The report also reveals significant variation between sectors. Companies in the industrials, consumer discretionary and consumer staples sectors have the highest supplier spend levels as a percentage of overall outlay, meaning they are most likely to benefit from spend reductions.
Proxima chief executive Gareth Evans said: “Our research demonstrates the crucial importance of managing external supplier costs. That 70 per cent of FTSE 350 companies’ spending now goes on suppliers should also be food for thought for executives looking for growth.”
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